urally varies
according to the standing of the house in question. In the case of some
importers the bankers would be willing to let the bill of lading pass
out of their hands on almost any kind of a receipt; in the case of
others a very strict and binding contract is invariably signed. But
whatever the form of the contract, it is to be borne in mind that when
the banker issuing the credit hands over the bill of lading to the
importer on trust receipt, he is allowing the only security he has to
pass out of his hands, and is putting himself in the position of having
made an unsecured loan to the importer.

Returning now to the particular transaction in question, the point has
been reached where the silk is in the importer's hands, that result
having been accomplished without the importer having put up a cent of
money. Moreover, for nearly four months to come there will be no
necessity of the importer's putting up any money (unless he should sell
some of the silk, in which case he is bound to turn over the money to
the New York banker as a "prepayment"). But in the ordinary course of
events the importer of the silk has nearly the four full months in
which to fabricate the goods and sell them. At the end of that time the
draft drawn by the firm in Canton and accepted by the Guaranty Trust
Co., London, will be coming due, and the silk importer will be under
the necessity of remitting funds to meet it. Twelve days before the
actual maturity of the L1,000 draft in London, the New York banker will
send to the manufacturer in Paterson a memorandum for L1,000 at, say,
4.86 (whatever is the current rate) plus commission. The silk firm pays
in dollars; the New York banker uses the dollars to buy a demand draft
for L1,000; a day or two before the four months' sight draft comes due
in London this demand draft ("cover") is received in London from New
York, and the whole operation is closed.

It has been deemed advisable to set forth the whole course of one of
these import-financing transactions, in order that each successive step
may be clearly understood. The question of just _why_ this credit
business is worked as it is will now be taken up.

The whole purpose of the business, it is plain enough, is to give the
importer here a chance to bring in goods without putting up any actual
money--in other words, of letting him use a larger capital than he is
actually possessed of. There are persons so conservative as to consider
this in i